American Could Give All Passengers Seat Back Entertainment – For Less Than 1/3 the Cost Overrun On Their New Headquarters

American Airlines is reportedly spending $1 billion on their new corporate campus and that’s apparently up from a previously-reported $350 million. It’s possible that’s not an apples-to-apples comparison. American has been tight-lipped about the project’s costs. However it fairly clearly represents a project that’s grown substantially more expensive.

Just keep that number in mind for a moment as we walk through the economics of American’s decision not to offer seat back entertainment for domestic passengers, instead streaming content to passengers’ own devices (mostly phones). Legacy US Airways Airbus A320s, by the way, aren’t expected to offer seat power to charge customer phones until 2021.

  • American’s mainline domestic fleet had 801 aircraft at the end of 2018. That is expected to grow to 806 in 2021.

  • Of those 83 Boeing 737-800s, 32 Airbus A319s, and 98 Airbus A321s have seat back entertainment. These were new aircraft ordered prior to being taken over by US Airways management.

  • If American doesn’t remove seat back entertainment from these planes — as they have planned to do — that would leave 593 domestic narrowbody aircraft lacking seat back entertainment in the 2021 projected fleet.

  • On average outfitting a narrowbody aircraft with seat back entertainment runs $1 million per aircraft. However the new approach, being used by Delta, is to stream entertainment to tablets installed in seat backs. That cuts the cost by two-thirds.

Using the new approach to cheaper seat back inflight entertainment, then, would cost American ~ $198 million. For context that would be 30% of what appears to be the cost overrun on the new headquarters the airline is building.

Last month I reported that there was internal vigorous debate over whether to reverse course on domestic inflight entertainment and add back some form of seat back video.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

More articles by Gary Leff »

Comments

  1. So, they’re spending $1 billion (+?) to build a corporate “Taj Mahal” for the senior executives, plus mid-level management & up while:

    – playing hardball with non-management/line employees and claiming there’s “only so much available” for raises, health insurance, pensions and bonuses;

    – and –

    – doing everything possible screw passengers by offering the most degraded, worst/cheapest to produce products possible for the highest fares possible – and all topped off with a generous sprinkling of ancillary fees aplenty?!?

    Yep, sounds about right for this desperately mismanaged airline! 😉

  2. “American has been tight-lighted about the project’s costs.”

    Does anyone ever proofread these posts?

  3. One of the most iritating things is you can’t even access a map of where you are using their entertainment system streamed to your iPad/phone. You have to PAY for internet and even then you have to use flight radar 24 or whatever. I had a window seat this week and all I wanted to do was lightly follow along with a map — one of the most basic joys of flying — but that’s been ruined.

  4. @Steve…. clearly you’re a new reader. Proofreading here, is done by the reader. Correct it in your head and move on. Gary types fast and doesn’t re-read what he writes its fine, you will adapt.

  5. Was on a flight last week on an AA 737 with some free time, and thought I would kill it watching a movie. I opened up the AA App on my Iphone, and started to watch a movie, and and at first thought it wouldn’t be too big a deal not to have seat back video. But then my battery started to run out and I had no power outlet to recharge. Since I needed the rest of my juice to get an Uber, that was the end of my video program. Another bonehead move by AA.

  6. @Howard Miller. Don’t forget the one that most matters to them…angering shareholders as their stock continues to tank.

  7. IOW, AA’s poor financial management is materially affecting the customers’ experience. After all, the reason they are foregoing IFE is the cost.

    Unless some big shareholders start to make waves about AA’s lower ticket prices, this will continue until the next economic downturn forces change.

  8. Apple spent $5 Billion on their new campus, yet liberals don’t bat an eye. This is such a non sequitor arguement, the company needs office space to operate, it’s not an either or proposition.

    In addition, your seatback entertainment cost estimate presumably only includes upfront capital costs. Add to that additional fuel burn (liberals think CO2 is the devil, remember?), maintenance costs, and higher content licensing costs.

    This post is just pure nonsense. You can hammer AA for many things, but this is pretty weak.

  9. @WR2 firstly don’t get why you’re political affiliations need to be broadcast on a regular basis.
    Secondly, Apple doesn’t screw its customers over. They provide quality products, at a price.

  10. @WR2 This isn’t about politics.

    Apple has a market value of $900 billion and generates annual discretionary free cash flow of $60bn. Apple has $225bn of cash and $112bn of debt. Spending $5bn on a headquarters for a growing company that is financially healthy is not a big deal.

    American has a market value of $13.5bn. They have $33bn of debt. And they have burned cash (negative free cash flow) in 2017 and 2018, in the midst of a strong economy with peak travel demand and reasonably low oil prices. When we do finally have a recession, American is going to bleed cash. Spending $1bn on a new custom headquarters is just silly when they could lease quality office space in Dallas for a fraction of the cost.

  11. Rumors are that AA is re-thinking project Oasis (aka will cancel it) and re-work the passenger experience. The A321 Neo and new A321 layouts work great and are same as DL’s. It’ the 737’s that need to lose a row or two. Power is also starting to show up on the A320’s (yea!) and the refit puts them on the A321 (737 and A319 already have power, as does the int’l fleet not being retire by 2021).

    I always make sure I am charged up and have a back up battery (they are cheap, small and easy to use) no matter who I fly. My last DL flight only 1 out of 4 planes had IFE or power, so it’s not just an AA issue.

    My guess is that once the MAX crisis is over, the Oasis project gets dumped and wireless in seat gets added, to at least the A321 and 737. A319 and A320, just put in tablet holder and I am good.

    Personally, I was on the new AA A321 NEO and the tablet holder, power and wifi was fantastic. Most seatback IFE don’t allow for Bluetooth and I have (like many others) wireless BOSE’ noise cancelling headphone, using my own devise is WAYYYY better. If they can make them seatback IFE blue tooth compatible then I am all in, if not, all I need is a table holder and a plug. Time will tell.

  12. The outrage over something like seat back entertainment (at least on domestic flights) is something I never understand. Everyone I know has a smart devise (phone, tablet) or laptop when they travel. You can get entertainment for free (as well as live TV) on American flights so what’s the big deal about seat back entertainment. Gary you really have an axe to grind with American. Don’t know why but it is getting old and petty.

Leave a Reply

Your email address will not be published. Required fields are marked *